I like the concept of the "wide shelf all the way across" like CPArtist has shown above. Yes, it's mainly a Craftsman thing, but I think it can work in other applications as well. If you're going to use tile on a fireplace, I agree with going with something really great -- and handmade to your specifications sounds ideal. This is a focal point, not a place to scrimp! I think "taping it out" is a wonderful idea. You'll need a big, wide space, but go into a hallway if you have to. Or even do it outside. So many of us are visual people, so SEEING is best. If you're trying to fit a TV on one side or the other, here's a question for you: Must your built-ins be symmetrical, or would you be okay with one side -- the TV side -- being larger than the other side? This question has no right or wrong answer; it's your opinion. And one last thought: If you do end up with a SMALL fireplace (and I didn't do the math, so I don't know), you might consider going with a small wood stove (or a gas stove that looks like a wood stove) instead of a fireplace. Do some googling. It can be a good look, either inside a masonry fireplace or placed in front of a stone or tile wall.

Thanks for the input! If I liked the colors I would totally agree, it's very nice. I am just a cool colors kind of gal. First, I am going to try painting all the trim white as it;s gone totally orange with age. Maybe that will be enough to cool off the room. Maybe there is some way to build a wood surround and leave brick untouched underneath?

Perhaps you need a stipple brush. These are most often used for stenciling, but are also used for other paint techniques. A stipple brush applies paint in an up and down motion which might be better at getting paint into the holes. Here is a picture of two types. The one on the right is typical of stencil brushes while the one on the left is most often used on walls. I do not know that this will fix your problem, but it's the first thing that came to mind.You might be able to thin the kilz with water. Thinner paint is more likely to flow into the tiny holes. Also try using a sponge to apply the thinned paint.

Cool house! Oodles of potential! But you've got a lot going on here with the openness and adding a feature wall colour will not be doing the architecture any favours. I would keep it simple and go with one colour throughout. I would go with a white for the walls and the currently painted trimwork. Let the wood accents be the star of your house. That being said, there are 2 things that bother me in the photos. First, the dining room, why does it have a railing? Looks like a weird adult playpen. I would remove that railing and build wall-to-wall steps on each side of the dining room that go down to the lower levels and that would make your space more open and accessible. The other thing that bothers me is the very traditional furniture and lighting. I couldn't tell by your description if the furniture is yours or the previous owners. I would definitely replace all the lighting with something in a more contemporary style. Your furniture should also be simple lines and more minimal. You have an opportunity to make this a really special house. The architecture is already cool, what you do with it could make it awesomely cool!!